ABSTRACT
The starting point for any consideration of the position of minority shareholders is the rule in Foss v Harbottle.4 This rule, which has two strands, precludes a shareholder from bringing an action to pursue wrongs which have been done to the company. First, the directors have been appointed to manage the company’s affairs and they owe their duties to the company; any misfeasance, appropriation of corporate property or breach of duty on their part is a wrong done to the company and, as a separate legal person, the company is the proper plaintiff in any subsequent legal proceedings. Secondly, where there are irregularities in the way the company is run and, also, in many cases where directors are in breach of their duties to the company, the majority of shareholders in general meeting may, by ordinary resolution, ratify and adopt what has been done. In those circumstances, the courts will not allow a minority shareholder to bring an action pursuing a matter which it is competent for the majority to approve on behalf of the company. A shareholder who buys shares in a company must accept that the majority will prevail.5
